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Although primary objective for managers is to maximise shareholders' wealth, but many firms are started to focus on other stakeholders' interests in recent years. Company can prevent transfer the damage of stakeholders' wealth to shareholders when focus on stakeholders' interests. Views of stakeholders are often considered to be the company's "social responsibility", company also should maintenance stakeholders' relations to provide long-term interests of shareholders. This relationship can minimize stakeholders' conflict, turnover and litigation. Obviously, company can achieve their primary objective by cooperation with stakeholders instead of conflict with stakeholders (Smart, Megginson, Gitman, 2002 p17). Stakeholders are interest of an individual or groups that directly or indirectly affected by the organisation's activities, policies and objectives (Henry Frechette, 2010). Stakeholders can be divided as internal (managers and employees) and external (shareholders, customers, and suppliers) (BPP F9 p14). Different stakeholders may have common interests or conflict interests with company. Company board members must take care about stakeholders' interest. They can't make the decision based on their own interest or their relation with others organisation. When board members in a situation where interests of organisation act in concert with their personal interests or interests of another person or organisations, conflict of interest will arise (Anon, no date).
Every employee wants to maximise their salaries and benefits based on particulars skills and the rewards available in alternative employment. Most employees also want an employment with continuity (ACCA F9 p 15). When sexual discrimination was happen in a company, there will be conflict of interest between companies with employees. Sexual discrimination, sex of a person become the factor that takes into considers when company gives a promotion, job, wages, training or others employment benefits. The sex discrimination always happened on women because women feel they are unfair discrimination against man. But some of the man claimed that unfairly discrimination also happen to them. (Reference for Business)
Civil Rights Act 1964 (CRA'64) stated the gender discrimination in working place. Especially, Title VII of CRA'64, it strictly prohibits discrimination based on sex, race, religion, colour, or nationality in the employment aspects. The rules set by court determined that a company can't hire an individual based on sex. If company was discriminated on pre-employment screening or testing levels, companies can be sued by the court. The examples for gender discrimination or sexual harassment under the Act include an employee claimed that manager promotes position opportunities to male employees only. (Reference for Business)
Aubrey James (2010) states that Wal-Mart was claimed sexual discriminating against women on assigned job, position promotion, wages and training. Female's staff in Wal-Mart is 70% out of total staff however less than 1/3 managers are female staff. Wal-Mart set a policy that described women's salary pays are less than men staff and workers can't argue. According to Dr. Richard Drogin (2003) research, he found that:
female workers earn maximum 37 cents hourly less than male workers;
women make up 72% of the total Wal-Mart employees, but only 33% of its managers;
92% of Wal-Mart's cashier is women, but only 14% is Wal-Mart store managers.
[Wal-Mart Class, Plaintiff's Expert Dr. Richard Drogin's Statistical Report; New York Times, 12/30/04.]
To solve gender discrimination in the workplace, Wal-Mart should create a new policy to carrying out discrimination against employees. Company should take into consider qualifications but not gender when creating the hiring and promotions policies "Journal of the National Medical Association", for example eliminating the process of recruitment and promotion based on gender. Candidate's qualifications are the main factor that manager should consider but not their gender. The name and gender of candidates shouldn't take into consideration at the final decision. Besides, use achievements and background of a staff into consideration rather than gender and name when considering promotion positions within company. To eliminating sex discrimination on employess, salary should pay based on work done by refers to the pay scale but not the based on job position. Company should always employ qualified personnel and pay salaries with fairly. (George N Root III, 2010).
Corporate Social Responsibility (CSR)
Every people defined CSR in different ways. CSR means how a company business processes bring positive impact on society (Mallen Baker, no date). As Aaronson (2003) states, CSR means the business decision making that linked to ethical values, compliance with legal requirements, and respect for people, communities, and the environment around the world. Stakeholders are concern about what does the company actually done, good or bad, in terms of its goods and services, and how it bring the drawbacks to the environment and local communities, or how are the developments and treatments for its workforce (Mallen Baker). The reason why stakeholders concern about the issues, this is because their interests are affected by organisations' activities. So, if company has done any activities that not comply with CSR, company conflict with stakeholders will occurred.
Conflict among companies with stakeholders under CSR had happened in Wal-Mart. Wal-Mart had brought the environmental problems when constructing the second supercenter Wal-Mart store at Champaign-Urbana. Wal-Mart cleans the construction site without using the appropriate method. The tons of sediment at the construction site will flow into the rivers and streams when raining, lead to the waterway's life and drinking water for people will affected. Besides, pesticides and fertilizers was leave by the Wal-Mart at the parking lot. Animals, plants and human health will be affected because chemicals are carries into the rivers and streams when the rains fell on the lot. (Lindsay Robinson, 2001).
The simple solution to reduce the water pollution is enforcing Wal-Mart to comply with the rules stated by Environmental Protection Agency (EPA). EPA gives different procedures of inspection for Wal-Mart only to test their water pollution level (Lindsay Robinson, 2001). Another way to resolve water pollution is suggest Wal-Mart use organic fertilizer to replace the chemicals fertilizer. By using organic fertilizer, Wal-Mart also complies with another environment protection issue because organic fertilizer doesn't need bagged it (Mark Jeantheau, 2006). Besides, Wal-Mart also should use appropriate mitigation method when constructing their new stores, such as mug fencing and cleaning near-site road regularly to avoid the sediment pollution (Mark Jeantheau, 2008).
Shareholders & management (directors / managers) are in an agency relationships (Ross, Westerfield, Jordon, 2007). If one party (principal) assigns another party (agent) to perform works behalf on them, then the agency relationships will occur (Kaplan Publishing, 2007, p19). However, the principal and agents may have conflict of interest among each other (Ross, Westerfield, Jordon, 2007). Agent may act in his own interests instead of acting for principal's objectives. For example, management makes decisions in view of their own interests rather than looking for shareholders' wealth. When this situation happened, the agency problem will occurs. (Kaplan Publishing, 2007, p20)
The agency problem had found in Wal-Mart. Wal-Mart had set an ethics about conflict of accepting gift and entertainment. Wal-Mart can't receive any gifts or entertainment that will influence their business decision or transaction from any suppliers, potential suppliers or any person (Smith, 2005). However, Julie Roehm, Wal-Mart's former marketing executive, before appointing Draft FCB as an agency to handle $570 million advertising, Julie has received the expensive gifts and entertainment from the company. Additionally, Julie and one of the subordinate of the company had a secret relationship (Anon, 2007). Consequently, Julie Roehm was breached the company policy and conflict of interest with shareholders will arises.
In response to the conflict, an ethics manager should be hired by Wal-Mart to avoid the conflict. By doing so, Wal-Mart can show to the world that they are solving poor ethics problems by looking to their criticisms. Company's ethics should be set by ethics managers who hold the position in manage company's ethics problems. In additions, they also should cooperation with the company's Chief Executive Officer (Carolyn Smith, 2010). Moreover, when managers accepted gifts from or offered by suppliers that may breach company's ethics, they should report to Ethics Committee or Wal-Mart Foundation.
Trade payables are suppliers who provided goods and services on credit terms to company. Their objective is to get the full payment from companies before or on due date. In addition, they also want to maintain good relationship with companies and get ready to receive late payment in order to avoid damage to the relationship (BPP, 2009, p 14). Besides, suppliers and retailers emphasise on squeezing other's profit to maximise their own profits, because there are different economic entities between suppliers and retailers. This cause retailers' objective may clash with suppliers' objective because of the competition-oriented error. For example, retailer hope to hold inventory as little as possible in their warehouse that don't increase their inventory holding costs, however suppliers will give discount if company order goods at maximum amount (WU Jun, ZHANG Lei, WANG Mengya).
Wal-Mart is a world largest retail stores that provided quality services and products at low price. Instead to sell at lower price, Wal-Mart affects suppliers' profits by required suppliers provide products with lower price than market price to them. (WU Jun, ZHANG Lei, WANG Mengya). Wal-Mart put pressures on suppliers to meet their impracticable goal. Wal-Mart suppliers are in difficulty situation because Wal-Mart hopes suppliers to meet their low price by providing goods at low cost. Eventually, suppliers have to close down some factories because suppliers provide low price products to Wal-Mart, at the same time earned lesser from Wal-Mart. In order to maintain the trading relationship with Wal-Mart, sometime suppliers need fulfill Wal-Mart requirements to change the packaging or marketing strategy on their products (Gogoi, 2007).
In order to fulfill everyday low price strategy, Wal-Mart can reduce the conflict with suppliers in U.S. by outsource low costs products from overseas like China (Charles Fishman, 2003). The other ways to resolve conflict is using coordination system to maximise profits. This system can enlarge the overall function of the system than the total of all parts of sub-systems. Suppliers and retailers' logistics, information, funds, and knowledge can be share with each others, this can establish a mutual relationship, to distribute profits fairly, reduce inventory level, risks share and improvement in information sharing. By doing so, it will bring the reduction of total cost and maximisation of suppliers & retailers' interest too (WU Jun, ZHANG Lei, WANG Mengya).
Wal-Mart is the world's largest retailer and a successful retailer in U.S market that offers low price to their customers. This encourages Wal-Mart expand their business to international markets. Wal-Mart's performance and shareholders are inter-related, shareholders are concern about company performance because it will affect shareholders interests if company not doing well their business. This paper discussed the reasons why Wal-Mart doesn't doing well in global market. The main reason that Wal-Mart faced currently is internal and external problems. The internal problems included management and employees' conflicts, while the external problems are suppliers and environment conflicts. These conflicts may cause Wal-Mart loss shareholders' confidence to invest in their company and company's share price also will affect. It will cause Wal-Mart difficulty to fight with their competitors in global market and spread their business to new market. To avoid these problems arise, Wal-Mart should find some solutions to resolve the conflicts. So that Wal-Mart can maintain a good relationship with their stakeholders and shareholders rather than break their relationship.